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tv   Worldwide Exchange  CNBC  October 23, 2009 4:00am-6:00am EDT

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the ifo institute says the business climate rose in october, 91.9, pretty much in line with the consensus for 92. current conditions index, 87.3 vgs the reuters consensus. the business expectations index, 96. the oklahoma business indications index is 91.9. the consensus 92. pretty much in line. current conditions index was slightly weaker than expected. the german business expectations index, 96.8 versus 96.2. just to recap, as well, the euro, which hit fresh highs earlier on, just pulling back. maybe it was looking for something to be better than that. as far as the pmis are concerned, just to remind you of this, flash composite pmi, 53.
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the forecast was 51.6. it was 51.1 in september. that is a 22-month high. the employment index is slightly better than expected, 45.1. new export orders, 51.5, also a 21-month high. let's recap that. eric lacorz is a strategist. eric, i just ran through those numbers there. pmi seems to be better than expected. the ifo sort of on the money, really. what's the take away for investors? >> that's all right. we were all expected stabilization slight recovery everywhere. so we are seeing that probably this is normal conditions. but we shouldn't get too excited about those numbers. i mean, after such drop in activity, we have some better industrial numbers and better inventory rebuilding but this is
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thanks to government infusion. so indeed, this is a statistical recovery. and looking beyond that, we still expect growth to remain fairly anemic, both in europe and actually in the united states after this period of maybe inventory rebuilding that we still have to see going forward. >> what is interesting, when you look at the pmis for the euro zone, new export orders for the 21-month high, 51.5, how encouraging is that? >> well, it's important, but obviously, growth and probably german export growth will be favored by the resumption in growth in large emerging economies. so certainly, the positive side is to look to china, to india, to brazil, and look at the fact that this economic growth is providing some export for european and u.s. economies.
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>> okay. eric, we'll come back to you. we've got some more strategy in a few moments' time. just showing you reaction to those two bits of data, just come back. 1.5009. we obviously got up ahead of the data xt fact that it hasn't been an awful lot stroker than anybody thought it might be. resources, autos and banks, the ftse cnbc global 300 up 20 odd points. the ftse 100 pretty much up across the board one 1% for the ftse 100, dax and the cac. the euro is up against the dollar. the dollar has been up against the yen. it set a one-month high. we're looking for a yield spread differential now between the u.s. currency and the japanese yen and that's pushing the dollar up again even though it's
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down against the euro. and sterling has a big focus, as well. we're trying to find out whether the uk has exited recession. >> hey, ross, here in asia, some of the sentiment here in asia. the weekly yen helped provide support to the markets. the kospi up 0.6%, as well. earnings again in focus. we had earnings from kia motors, hyundai motors came in better than expected. the hang seng is up 1.7%. shanghai market up 1.9%. we are keeping an eye, of course, on the second style nasdaq borders being launched. that is helping sentiment in these two particular markets. the aussie market is up almost 1%. nymex seems to be pushing higher. it is trading flat, $81.18 a
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barrel. nymex light sweet crude is up 4 cents. now, in terms of brent, let's see how the picture is trading, as well. up just a touch there, 6 cents, pretty much flat, $79.51 a barrel. brian. >> thank you very much, christine. a bit of news here to share with you, this across the wires. the european union approving the tie up of merck and schering-plough, which would make merck the number two global dugmaker behind pfizer. so that is getting some approval in the eu, obviously, a major stumbling block for that merger, so that's going forward. take a look at the stock futures here on this friday. it's a pretty strong rally in the states yesterday against fair value, and we break that traveler's news in terms of earnings. and that was a major boost to the markets yesterday. up about close to 10 points in the dow, more than 5 points in the nasdaq and close to 5 points, 4 1/2 points in the s&p
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500. right now we are in positive territory. quick look at your bund markets, the bund at 3.34%. quick gander at your u u he ten-year note is at 3.47%. we've had a decent size range this week and we will talk about fixed income on the program. christine, back to you. >> let's talk about some of the global issues moving markets today. we have eric lacorz, he's still with us and i'd like to introduce nicu harajchi joining us live from asia. gentlemen, thank you very much for being wuz. nicu, asian markets are getting a will it on those upbeat earnings. where do we stand on this global rally, can we go higher from here? >> first of all, good evening from tokyo. it's good to be here. christine, that's a very good question. so far, we have seen the u.s.
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markets, the asian markets since the march lows have rallied somewhere between 40 to 80%. now, from my point of view, if you just break it down, you see the s&p 500 trading at the highest valuations for the past five years. so as the dow jones stocks 600 in europe. if you look at asia, they're not trading at such high valuations asset, but i still think that we have seen an extreme rally this year due to the fact that also the u.s. economy has been, you know, lending, spending and guaranteed up to $12 trillion. so obviously, we see this coming into the market. but i think we're going to see a recovery very soon. >> and eric, what about you? do you agree with what nicu was just saying? we're going to see a recovery very soon? >> yeah. we are seeing at least a statistical recovery. but the world is very uneven. you have on one side advanced economies that are still under
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confusion and it would be tough for central banks and government to withdraw quickly and massively or too early this profusion. on the other side, you see very genuine and solid growth in large and domestic economy growth in emerging economies. so we remain very favorable within a lot of potential and there's no premium incorporated in the valuation of those markets due to the visibility and the prospect for economic growth and earnings growth. we will remain very favorable to both and to much market and to the commodities market in terms of equities. >> let's talk about commodities and how to play it. a lot of investors are looking for places to put their money. eric, can you talk about how to play the commodities if it's not just in equities and give some insight into that? >> well, we do it through
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equities. we'll look at supply/demand balance. obviously, china is the one base engine for base metals and minerals. serm the recovery here and the numbers that we have are very positive. so we feel like copper markets, with the like iron ore markets, we feel like a few global player in that sector. as for the energy, it's a bit different because they are -- obviously, the u.s. matters a lot in terms of demand. what we see currently is the budget to resume. and valuations in the oil services are very compelling. so we see very attractive names in this industry, names like cedar rail, smith & national and so on. so we're keying into those sectors. >> nicu, what about you? >> well, first of all, we aren't
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expecting a recovery. we're expect ago pullback at these levels. back to commodities, well, we think that, you know, the commodities we have seen two factors. we are seeing the dollar pushing lower. obviously, we're going to see xhot commodities pushing higher due to that fact. i think that in the short to midterm, we expect that the dollar is going to get stronger and i also think that we're going to see some pullback in the commodities because they are having -- you know, especially in the last two months we've seen oil and gold coming up at higher levels. >> nicu, we'll have to leave it there. thank you very much for your insight. nnicu harajchi and eric lacoz. let's move on to some stories we're looking at. japan airlines has been asked to reduce its capital according to the nikkei business daily. the banks and government are reportly considering a plan to retire about 99% of the
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airline's common shares. but the move would need approval from two-thirds of its approval shareholders. a task force is charged with turning around the carrier seeking a $2 billion bridge loan to prevent jal from running out of cash. jal shares fell 6.6% in tokyo trade today, 114 japanese yen. and reported third profit for kia blew past consensus forecast. revenue topped forecasts coming in at $3.8 billion. and this is how kia shares reacted over in south korea today, jumping 6.7%, 18,300 south korean won. and south korea's heinix semi conductor is back in the black
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after seven straight losses thanks to a rebound in prices. hynix posted a net profit of $700 billion. this is how hynix shares reacted. much of the use is factored in. the shares dipped a little bit to the down side there at 18,750 south korean won. ross. >> we also have uk preliminary third quarter gdp will be released in underunder 18 minutes. the quarterly rate is expected to rise for the first time by 0.2% which would effectively mean we're out of recession. those figures will come out after disthe appointing sales this week. government borrowing set a record high of 77 billion pounds, as well, and that's the highest half yearly figure since the end of the second world war.
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volvo's operating loss for the third quarter was less than expected. despite the group seeing signs of stabilization and demand, executives incyst a significant upturn is still some ways off. overall, they dropped off a staggering 42% last month according to the industry association. the acea. >> ross, it's been a pretty busy week for microsoft launching windows 7, launching its first retail store. today, the company reports first quarter results before the opening bell. microsoft is expected to earn 32 cents a share and about $12.4 billion worth of revenues. pc shipments edged up during the quarter, but analysts say it won't be enough to keep windows sales and office from dropping. they believe microsoft will driver better than expected cost cutting measures here. ahead of the numbers, it's trading here in frankfurt up about 1.3%. in terms of earnings, american
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express's third quarter profits fell 22%. consumers spend and borrowed less. results, though, topping analyst forecasts. analysts say there are signs that the drop is stabilizing and loan losses are improving. but the company says it's too early to say all the economic challenges are over, given the potential impact of higher unemployment for an extended period of time. am ex fell 0.5% after hours, but in frankfurt now up over 2.5%. still to come on the program, will britain officially exit recession? we'll find out. plus, it covers a larger population. the eu summit is under way and we'll find out what's happening with that. and say good-bye to those seven figure pays.          
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and on the stock markets right now, global equities are firmer. the ftse is up 54.526.
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it beat forecasts for the right. it did have in the numbers described as well. the q1 revenue is up, as well. high definition services up in bskyb outperformed. we have the miners up, as well. the big driver will be coming out, as well. meanwhile in germany, they're reacting to the ifo and the pmis we've had out this morning. sylvia, has that made any difference? >> the pmi was a bit of a surprise. that, of course, is looking into the fourth quarter gdp numbers and it indicates that gdp will come in relatively strong. maybe 0.3% and maybe something similar for the fourth quarter. that was a bit of an upwards surprise. the ifo failed to surprise.
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91.9 that is broadly in line with expectations. consensus was around 92. we're ticking up a little bit. expectations are running ahead with the ball. overall current conditions are better. but when you look at the breakout of the sectors, it ain't all that rosie. the manufacturing sector is a little bit more pessimistic. the retailers are a little bit more pessimistic. unchanged reading on construction and a little improvement on the producer side of things. so it's a mixed picture, especially in terms of the outlook because there are a number of sectors that expect a rougher wind as the new year starts. but as i said, pmi on the positive side. overall, the dax had a good run for its money. this morning, we had this positive spillover from the u.s. and from asia. we took it off to that also a bit on the technical side, i would say.
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stephane, what's up in paris? >> we are driven by strong economic data today. we had strong economic spending up higher than expected, up 2.3%. and the pmi reached 48% in level and that's a confirmation about a stronger than expected recovery. in terms of individual stocks, we have alcatel-lucent after goldman sachs upgraded its target to buy. danone, also in good shape. the company posted a 7% increase in volume in its division in the third quarter. that was much better than expected. the company also confirmed its financial darth for the end of the year. danonis up 2.7%. despite a decline in the third quarter, the company is being helped by weak activity in the construction sector in the third quarter, but still maintains its
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guidance for the end of the year, expecting a recovery at the very last -- at the very end of 2009. let's have a look now at the swiss market with carolin in zurich. >> sangenta, still the biggest gainer on the smi and that's almost 4.5% after the company posted a drop of 12% for its third quarter sales. that was a bit lower than expected. and on top of that, the company confirmed its full year guidance of eps growth at around 22008 levels. when we talked to the ceo of the company, we also asked him about the company and how the company is dealing with the weaker
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dollar. >> we've seen substantial turn around in the currency beginning here in the second and certainly in the third quarter. and it's such that right now the euro and the swiss franc are such that right now we're going to see positive impact in 2010 as we suggested. so it has been a lot of movement, but it seems like the worst of it is behind us. >> and let me move on. let's quickly talk about credit suisse here. as expected, many brokers increasing their price targets for credit suisse this morning. among them, merrill lynch, jpmorgan and credit swiss is moving higher on the back of that about 1.5%. that's frit zurich now. now back to christine in singapore. >> thanks for that, carolin. asian shares here are trading on the back of reports. machinery stocks leading the way up. shares of japan airlines clearly
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in focus, that stock dropping 6.6% on the nikkei report. a reuters source has said that if jal was liquidated, its assets would exceed $8.8 billion. shares of automakers rallied. third quarter net profit for kia motor shot to a record high of $338 million. the carmaker expects sales to grow by double digit percentage next year. hynix semi conductor is back in the black after seven straight quarterly lows. in the end, much of the news is factored in. i want to quickly mention the shanghai composite closing up 1.9%. today marks the launch of chinex. that is giving a little boost to
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the shanghai stock market. the hang seng closed up 1.7%, getting some support from china, as well. and the australia markets closing at a two-year high, 4,859. on that note, i'll send it over to you, brian. thank you, christine. here in the states, fed chairman ben bernanke could capture investors' attention today. he will talk about financial regulation and supervisor at the boston fed's conference in chatham, massachusetts. that's at 8:30 a.m. new york time. he is expected to speak for 30 minutes and then take questions. cnbc will carry that speech live. and then at 11:30 a.m., vice chairman donald kohn will speak at the boston fed conference in massachusetts. u.s. pay czar ken feinberg who has been very much in the headlines this week will speak at george washington's university law school at noon.
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economic data, we get existing home sales for september at 10:00 avm new york time. they're forecast to jump more than 5% of 5.38 million homes. in addition to microsoft earnings, we get numbers today from oil services firm schlumbe schlumberger, honeywell, ingersoll-rand and whirlpool. coming up on "worldwide exchange," the aussie summit is in focus at the thai resort town. find out what kind of trade deals we can expect from the region. and has britain finally existed recession? we'll find out with the flash release of gdp right after this.
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hello. i'm ross westgate. is britain about to get some growth? >> and i'm christine tan. here in asia, the aussie summit kicks off in thailand. as many as 42 agreements are expected to be signed at the event. >> and i'm brian shactman. in the u.s., microsoft earnings and a speech by fed chairman ben bernanke could set the tone. in just under a minute,
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we'll find out whether britain exited recession in the third quarter. those figures are coming out in about 50 seconds. before that, global equities are firmer now. the ftse cnbc 300 is up 19 points. just coming back from the highs of an hour or so ago. stronger than expected, export orders are up. the ifo figure was slightly disappointing, but it still improved. so gains around 1% right now pretty much across the board. a number of mining stocks again are firmer. we've seen the euro today upwards fresh highs against the dollar. hit 1.5061. that was the peak before that number came out. this is a case of buying on the rumor and selling on the fact. euro/dollar, 1.5011. the dollar is firmer against the yen, though. they're now concentrating o yield spreads. treasuries are just improving on the dollar's favor in that. what about sterling, how is that going to react to gdp data
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coming out of the uk? well, third quarter gdp, i'm afraid we have not exited recessi recession. it's minus 0.4% on the quarter, 35.2% on the year. it was forecast to see some expansion. the economy sees a report sixth straight quarter of contraction. now 5.9%. a deeply, deeply disappointing number out of the uk. let's see what happens with sterling. no surprise to see it tailing back from the session highs, 1.6616. it is a flash number, but of course, we've seen retail sales numbers that were flat and a weak manufacturing industrial production data for the month of november has no doubt contributed heavily to this. third quarter preliminary gdp
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contracting. marcus, very disappointing. >> it's extremely disappointing. most of us were expecting the uk to exit the reception, especially given tim pulse coming from the weaker sderlg. but i think it's a matter of time. i remain quite optimistic for next year. >> we knew that the inferring data was flat. but there must have been something else going on here. services hasn't been as much as we thought. >> no. clearly there must have been a big disappointment in the services index. a reality check for those calling to a quick end for quantitative easing, for a quick exit, it's a clear sign that policies are still needed. >> that leaves -- does that leave the door open, then, in november for more qe? when they look at this data, are we going to see more qe, do you think? >> i believe we will. there is room for more qe and i think with this kind of data
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plus the pressure coming from the high issuance of debt from the treasury, i think the bank of england will be under very heavy treasure to extend its qe policy. >> and as a result, we've seen deals rally. take a look at sterling. for more than a cent, 1.5455. a short while ago, i believe we dipped below 1.65. so we've been pricing in an end to qe ever since we've had the minutes out and it looks like maybe with this data, we might get it back in traction. sterling will be key. what happens to that over the next few days, christine? >> here in asia, earnings vivian here in asia and we have earnings coming from the likes of chindia. the nikkei 225 up 0.2%. the kospi up 0.6%.
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the hang seng market up 1.7%. the shanghai composite got a boost helping sendment in these two markets. the aussie market up 1%. overall, the a pretty good mix for markets here in asia. brian. >> thank you very much, christine. let's take a look at the equity markets here in the states. we're positive by eight points in the dow, the nasdaq is positive by about 5 plus points. of course,, just incredible, incredible results after the close yesterday. and maybe the u.s. consumer has a pulse. the s&p 500 right now positive by less than two points, as well. take a quick look at the u.s. ten-year note. we were at 3.47, i believe, at our last check. take a quick look at where we stand now. we lost one basis point at 3.46%. let's bring you back in and talk
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about the global economy. we heard a lot of talk and we'll hear more today from mr. bernanke in terms of positioning. how do we get some of the liquidity out when we need to? is it a rate issue or is there going to be a bunch of measures by stealth? when is this going to be a reality and what do you take of all the talk we've gotten from policymakers in the last week or so? >> what we are getting from policymakers is mostly aimed at keeping inflation expectations in check. the movement in gold prices is getting policymakers a bit worried that inflation expectations might become -- i think in terms of the fed, the strategy is clear. they will take some of the liquidity out. we know they've been testing how this could be done. i think increasing the policy rates will not come until probably the last quarter of next year.
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they will start by withdrawing liquidity. it's still way too early. >> marco, hi. this is christine in asia. when you look at the weak dollar, to what extend does asia depend on the dollar's recovery to drive ex ports? >> not so much at the moment. the weaker dollar we are seeing for the moment is a reflection of the improved mood in the market. so globally, increased risk appetite and the normal amount of liquidity. so you have carry plays, investors in risky assets and a fuel by funding on dollars. i think the weak dollar is not an object tackle for asia. now, going forward, some asian countries will be faced with a difficult tradeoff. we're getting more capital inflows. growth is speaking up. they may have to allow for a bit more of currency appreciation, but not to the extent that it could jeopardize a recovery.
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i think asia will continue to lead the global recovery. >> yeah. and it's interesting because looking at that, sort of that growth that we're getting export orders today, actually, we're pretty good. they were up to a 22-month high. is this still going to work for them? >> i think it is. global command for the exports is up. some of the competitors cannot. but germany relies on export rather than on the price that is the euro. >> do we not need some rebalancing? i mean, the german government is never going to move away from an export-led recovery. the western world would like them to say, look, do more to stimulate spending because the cash for clunkers scheme shows
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that germans are quite happy to spend money if you give them the right incentive. >> that is absolutely correct. there needs to be more rebalancing and the absence of rebalancing within europe is a problem, it's a serious problem for europe. it will become more and more of a headache for the european central bank. but the problem is, in the case of germany as for china, it's very difficult to tell these companies to change a strategy which seems to be working. >> marco, thanks for joining us. have a good weekend. christine. >> ross, leaders of the association of southeastern nations meet today in the resort taun of wahhin, thailand. up on the agenda are free trade agreements and, of course, blueprints for an eu-style regional integration.
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for more, mark michaelson joins us. good to have you with us. >> hi, christine. >> this is a global sale. for the sake of our global audience, can you tell us why asean is important for the global economy? >> it's not just asean. asean is a important group of communities. but there is china, australia, new zealand, what they do and what they decide is going to have a great effect on what happens in the rest of the world. >> a lot of trade agreements are expected to happen at these weekend's meetings. to what extent will protectionist issues come up, thereby stalling trade talks? >> we see that also, anyway, in many of these groups. the philippines are still worried about sugar and rice because they have obligations to
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reduce tariffs in the next year or so. but still, i think there will be movement in that direction. sure, there will be some protectionism, but at the same time, i think there will be a lot of companies that look at cooperating more on a regional level and, of course, there are several countries, including japan that are trying to drive this a little bit fast perpendicular. >> mark, any of this protectionism going to hurt u.s. companies trying to expand? >> well, he think it's going to hurt everywhere, really, if it becomes that. we're seeing a little bit more protectionism in this recession, although perhaps not as terrible as some people have thought. but it's very easy for this to slip over. and at the same time, we have a lot of countries that are there making agreements, free trade agreements with asean, for example. and the u.s. on the same side is
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not very much forward to this. so is the extent going to be on the sidelines? certainly it raises some issues and concerns. >> and look, they all compete with each other on the export side of it. do they keep all building up, you know, u.s. reserves? is that -- do they just keep playing that game? >> well, i -- i think not forever. but at the same time, making the changes is fairly difficult. you've put your finger on one of the major challenges, always, ross, in that they are pretty much competitive with each other and finding ways to developmeco it is difficult. but now bringing in the other asian powers puts a different mood on the proceeding and may hope move some of these ideas forward.
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>> mark, do you think this can become an eu-style global community by 2015? do you think that target is achievable? >> it's too early to tell, but we've already said that there are a lot of -- there's a lot of competition and even some conflict among the various members. we see cambodia and thailand having a bit of a fight already. auto few others, as well. of course, mianmeer is a very controversial subject. . so a lot of times, a lot of the country res seeing advantages in looking toward at least greater cooperation. i don't think it's going to be by 2015, but perhaps we'll see at least greater cooperation in something resembling a regional group by that time or certainly a few years later.
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>> it will be interesting to watch. thank you very much for being there. moving on to a couple of stories we're watching today marks, of course, the launch of chinex, china's nasdaq-style market. 28 firms we're told will take bu on the chinext stock exchange next friday. raising some concerns that the market will be excessively speculative. to put this into perspective, the average pe ratio of stocks on the shanghai composite is around 26. that is seen as pricey against 17 times for hong kong listed shares. elsewhere, china -- japan airlines, rather, has been asked by creditors to reduce its capital. that's according to the nikkei business daily. banks are reportedly doctoring a plan to retire. about 99% of the airline's
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common shares. but the move would need approval from two-thirds of its shareholders. earlier quarterback it was said if jal was liquidated, its liabilities would exceed its assets by more than $8.8 billion. jal shares meantime falling 6.6%, 114 japanese yen. the techniqueo motor show opens its doors to the public tomorrow. carian jogi has a quick drive by on what to expect. >> cnbc has been broadcasting live for the tokyo motor show for the last two days. but it's time for the journalists to go home and make way for the public. doors open at 9:00 a.m. on saturday. when they do, here is what they'll find. >> from the glitz and glamour, you can imagine there are no woes for the auto industry. but it's been a painful time
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around the world. and it's reflected here. none of the major foreign cars brands are represented. but amongst the sparsity, japanese carmakers insist it's business as usual with new technology leading the way. >> translator: toyota is committed to enhancing its lineup of hybrid vehicles which are likely to corner the future and to make them available to people all over the world. that said, toyota is not limiting itself to gasoline electric hybrid vehicles for the future, for the earth, for society, the era of the reinvention of the automobile is nearly upon us. >> reporter: electric may be the future, but for now, it's the hybrid that's winning the innovation rate. it's estimated that by 2020, 30% of the world's cars will be hybrids and current market leaders toyota aims to keep that whole position.
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it must be pleased, then, that it won japanese car of the year at the show. the biggest intervention of the manufacturing sector in history has kept the industry afloat over the past year. i spoke to carlos gohsn, president and ceo of nissan about what a world without insentive is going to look like. >> it gave us automatics again for restructuring, reducing our inventory to prepare for the recession coming. obviously, we knew from the beginning that when you stop the reaccepting, we were going to have a negative impact. this gave us time to reorganize, take the right measures and obviously not to forget the crisis. >> so mr. gohsn is betting big with this, nissan's all electric lease car. it has a 160 kilometer driving range. as for that all-important cost
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for the consumer, nissan promises it will be around the same as a similar sized gas-powered car. one thing is certain, though, as we talk to the top names in the industry. driving has to be a little bit more fun. so remember when you wanted your first car? you probably wanted to look something like this ft-86. but if that price tag is too steep, there's always this so that the kid in all of us to drive it to the future. and hopefully not crash. >> beats the real thing. now, the euro rose slightly against the dollar. the survey of 7,000 german businesses shows that business sentiment is rising, but not quite as much as we previously thought. the pick up in consumer spending
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continue thes on the whole. the expectations portions of the index was higher than expected. in korcht news, singenta's stock is higher in switzerland. that was in line with expectations. the figure was 12% lower than the previous quarter. and fewer pests in the cold wind. with you the maker of agricultural chemicals has confirmed its full year outlook and the ceo mike mac is cautiously optimistic from last year. >> some of the crisis for 2008 caused a number of governments to be sure that they have robust to agrinomic policies. so we feel very pleased and privileged to be in a sector that continues to offer growth prospects. >> here in the united states, cit has reportedly struck a tentative deal.
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a settlement would help the commercial lender as it tries to avoid bankruptcy and trying to get bond holders to agree to a debt swap offer. under that deal, goldman could be entitled to ads 1 billion make whole payment. kriesz ler financial is going out of business. they will liquidate and repay inveriers by the end of 2011. chrysler financial is in the process of shifting much of its loan business to gmac as now it is the preferred lender for gm and chrysler. ahead on "worldwide exchange," ben bernanke is due to speak at the federal reserve
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conference in massachusetts. the question is, will he offer crews on his rate strategy? and what will it mean for the fixed income market? >> and we'll take a look, the shock has hit.
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sterling has been hit. britain is still in recession and firmly. we contracted in the third quarter minus 0.4%. most expectations thought of a rise of % or 2%. so it was a big shock. most traders thought we would be exiting qe, but that's not all up for grabs. 1.6446. we've dropped 1.5% against the dollar since that figures. but we were certainly above 1.66. joining us for more, sam stanley. that has put the cat among the pigeons, hasn't it, stam? >> it certainly has.
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the uk coming out of recession, all of a sudden we will be looking at more stimulus thigh qe. i think they'll have to go out from 175 and probably means the cable rise that we've seen may welcome to a bit of an end if we drop through 1.64 today. what is the target here? you know, two weeks ago or ten days ago sterling was under the kosh. do we go back to those levels? >> not necessarily. it's made major process. it had to stay above 1.6450-type levels. it did that. it got up to 1.66 odd. so if it drops back below that previous support, which is now resistance, then we will have a massive question mark whether it will resume the down trend. it could all change today, though.
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>> hey, sam, this is christine. how much of that money will glow into higher yielding commodities like the aussie and the kiwi? >> well, there's still a lot going on in there. commodities are rallying. basically, the kiwi and the aussie dollar at the moment is a place to save your money. so at this stage, the trend is still there and you have to go with the trend. certainly after today's figure, it won't be going into the pound. >> sam, euro/dollar, what is more likely, 1.60 or 1.40? >> at the moment, i still favor a test of 1.5070 and then probably 1.5150. and then back down from there,
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brian. so probably back down to 1.46. and then a slow uptrend. so probably 1.60 is more likely, but it's going to take time. i don't see sort of 1.60 levels for quite some time now. >> sam, that's all. we're up against the time. we appreciate the time, stan state le. coming up in the next hour of "worldwide exchange," you might want to say good-bye to seven figure salaries, at least for certain companies. obama's pay czar and the federal reserve stepping in to deem what they referral to as excessive pay.
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i'm ross westgate. britain's economy reportedly slipgs again, extending the recession to the longest in history. >> and i'm christine tan. in asia, hynix semi conductor reports its first profit in eight quarters. >> and i'm brian shactman. in the u.s., a pair of reports could set the tone for trading today by fed chairman ben bernanke. welcome to "worldwide exchange" on this friday. it's been a busy, pretty hectic
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week especially in terms of earnings. those of you just joining us in the u.s., it is just a shade before 5:00 a.m. new york time. we have weakened a tiny bit in the futures here. we are still positive by about 4.5 points in the dow. we're positive in the nats dak, which is buoyed by incredible results from amazon. i think about a 68% boost in profits. that shows you that the u.s. consumer is still in the mix here. against fair value with the s&p, we're up about 1.25 points. that is why we stand. microsoft's earnings this morning and the stakes will be huge. they've, of course, opened a retail store, windows 7 launching. neither of those having an impact on the previous quarter, but of course, it will give some insight into pc sales in the states and globally, of course. take a quick look at your bund market. that is at 3.32%. and a quick gander at your u.s. 10-year note, 6.34%.
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ross, those gdp numbers, they have a major impact on the bourses? well, look, they certainly took us off the session highs, no doubt about that, brian. there we go. as soon as we got the numbers out, the ftse cnbc global 300 that's tracked up about 12 points. the ftse is tubed primarily to the global growth story. but it has taken us off the session highs where we've sunni most of the -- we've got technology, resources, chemicals, autos and insurance as the strong sectors. what you have note seen doing well is sterling. it's appreciated against the euro, as well. sterling/dollar, 1.6436. we were above 1. 6/6 when that news came out. pretty much last night most sterling traders had pretty much
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priced out the prospect of any more qe. and now they have to start pricing it back in again. and that's effectively the result of the gdp picture that we've found out. the other surprise is euro/dollar hit above 1.50. that isn't a surprise. the dollar has climbed against the yen and now it seems to be that traders are focusing on the differential in yield spreads between dollar/yen. so maybe the dollar is a funding currency of choice. that story might be changing a little bit and that might have implications for commodity markets. we'll talk about that. so there are lots of things going on here, christine, that we have to keep our eyes on. >> asian markets not get ago chance, of course, clearly directed to those uk numbers. so we will see some reaction on monday. but this is how the pictures look on monday. asian markets closing higher on upbeat earnings. the nikkei 225 is up 0.2%. the exporters get something support from the weaker yen.
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kospi up 0.6%. and the hang seng is up 1.7%. a lot of liquidity driving some money inflows into this particular market. the shanghai market, look at the boost from the launch of second nasdaq style board and the aussie market is up 1%. overall, a nice session here in asia. good finish. let's see the correlation between the dollar and the oil. nymex is trading pretty much flat, down 7 cents, $81.12 a barrel and brent, as well, should be trading around the same ranges, as well. down three cents, $79.48 a barrel. brian. >> thank you, christine. the executive pay, it's been in focus on both sides of the atlantic ocean. the u.s. pay czar, kenneth feinberg has unveiled plans to cut compensation for top earningers at seven banks that
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had been bought back by the government. he said he would lower compensation rates for the two final months of the year. and in the uk, the financial services authority announced it would take action against banks which channeled profits into bonuses rather than building capital. bavrng of america in the states has criticized already the u.s. pay plan saying they would hurt the company's ability to retain talent. speaking to cnbc, feinberg said he took into consideration competitive concerns as well as the public interests. >> if you look at the statute and you balance citizen anger with under the statute the need for these companies to repay the taxpayer, i think i've struck the right balance here, considering those antagonistic viewpoints. >> joining us for the whole hour is guest host on "worldwide exchange," we want to welcome in greg smith. greg, before we talk about the markets and everything else, i don't know how much you read about what feinberg is doing,
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but if it's just really for 2009, they're going to decide on 2010 just for these seven banks how much of an impact does it really have on this concept of retaining talent? would it really lead people not to work at these companies or people to leave them? >> it's somewhat of a balancing act because there are no free lunches. these companies got themselves in trouble. they were bailed out by the taxpayers so there is a moral duty there. indeed, a fiscal duty there to repay the taxpayer and to balance that with the risk of these people leaving. but i guess that's what a free market is all about. if you enjoy paying, to get out of it, then you're going to have to pay for it. i think he has struck the right balance. >> when it comes to this situation, because you look at goldman sachs, they got out from the government's clause so they can give these record bonuses. so is it just to get these companies to hurry up and pay
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back from the government so they can go back to doing whatever they want or is it just this symbolic message to main street? >> i think it's probably a bit of both. obviously, we're going through this process at the moment about ensuring the current financial crisis, but making sure that it doesn't happen again. so it certainly does need to be thin. and also, you mentioned goldmans's and, being out from under the clutches, they can effectively pay what they want. their obligation extends to their own shareholders. so certainly the company under the governments will be quickly inclined to pay back as soon as possible possible. >> greg, this is christine again. financials today rally again pushing markets higher. but we did get those numbers coming out from the uk. do you think this has any implications on the rally we're seeing in the equity markets? >> i certainly do. the value we've seen in equity markets has been something of a
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purple patch. and from our point of view, it has gotten away from fundamentals and i think the gdp numbers we saw today in the uk are, again, something of a wake up call. but also probably another signal that i think central banks are going to be generally quite reluctant to reduce the stimulus than been injected any time soon. certainly in the uk's case, we may see the stimulus accelerate in terms of qe. so i think that's going to underpin markets to some extent, but i also think certainly some things in the market have gotten ahead of themselves. >> yeah. it also suggests that at the moment, there is nowhere near enough strength. even though germany is doing better, there isn't enough strength to be supported without it. >> that's right. and we've been talking about china, as well, the great growth numbers.
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are they going to suddenly tighten? and we haven't seen inflation bid at all yet. to risk a double dip is worrying. >> stay with us. we'll come back to you and talk about this, whether the yield differ republican yald means that the dollar losing its funding status and what results that might be. some of the other things we're following, brian, what are we looking at? >> well, we're going to update all the top stories across the world. we're going to talk about chairman ben bernanke of the federal reserve speaking today at a conference in massachusetts. of course, we're looking for any insight into the rate strategy moving forward. we'll hone in on fexed income right after the break.
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okay. watching cnbc's "worldwide exchange." britain's economy unexpectedly has shrunk again. it's extended its recession to the longest in history. the news sent the pound plummeting. it contracted 0.4% from the previous quarter and that brings if total peak to trough contraction to nearly 6%. elsewhere in europe, the picture is slightly different.
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the german ifo index up sleetly in october signaling a hedge of recovery continues. we saw the pmis today stronger than expected. so how are bond traders supposed to react to all of this? joining us with more is richard mcguire. greg smith is with us. richard, we got to the point as a guilty trader, you have to start wondering what would happen without support of qe with this growth number. do we. that discussion? >> yes. i think the risks have changed we thought in the wake of the cautious if not cautiously upbeat minutes we saw from the bank of england this week. but while we were speaking to our scenario, the bank of england ups the can we ante by another $25 billion come november the 5th. the risk is that that was the most they would be willing to do. but in the face of what we saw this morning, we stick to our 25 billion call, but now we think
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that's possible the least they will do. >> what does that open ourselves up to on the upside? >> clearly it's being taken positively by glders. we're now fairly confident that the ongoing subsidization of the slew that will come out of the bank of england will continue. we thought 25 billion. we still think $25 billion. bear in mind that the market focus else on the opposite. 25 billion doesn't, however, offset the weekly issuance that is coming through the pipeline. the market still needs to take down $2 billion to $3 billion on a weekly basis. supply may still become an issue come november, but that said, you know, it's as we say in our discussion, the risks are that the bank may be more aggressive on the qe front providing more
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upside to guild prices from here. >> richard, the government has to borrow at pretty cheap rates. what is the breaking point here? twh will that turn? >> the uk and the u.s. are very different animals. the u.s. has been far more able to fund its deficits. the world reserve currency, whereas in the uk, we have a very palace budgetary and uncertain outlook for sterling which far reduces appetite for guilty. if you're comparing the two, the appetite for treasuries should remain relatively buoyant going forward, not least of which because our fundamental outlook is less than positive.
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we think that next week the u.s. will return to positive growth in the third quarter. but we think that further out, the risks are starting towards an anemic recovery at best. and fiscal stimulus begin to fade. >> richard, this is christine here. here in asia, things are looking better. we have the rba raising rates. which central bank do you think is going to follow suit next? >> you're right, the rba is leading the way as australia remains comfortably in china's slip stream and as we saw this week, the chinese data pointing to continued buoyant activity there. the next bank to raise rates, we think, will be norway, which will raise imminently. really, norway is a similar story to australia as the key oil producer, you could say norway is europe's australia.
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>> richard, it's greg here from fair profits. inflation on the continued tips is showed just under 2% at the highest since june. with oil over $80 abdomen gold implying that we're going to get a lot of inflag, it doesn't seem like the bond market is taking this too serious le at the moment. when do you think they will start being priced in and will it start to weigh, as well? >> well, at the moment, the inflation is caught between two opposing forces, as you see. oil is rising, gold is rising and a weaker dollar is, of course, inflationary. but then the still control uncertainties regarding the economic outlook and the yawning output gap that the u.s. faces means that markets in general have still not completely moved
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away from the issue. and the mid point there is around 2%. but where we go from here, i think in the u.s., i wouldn't necessarily rush to take out inflation protection. probably because of less than upbeat growth outlook means that the upper gap will continue to bear down on core prices and so i think really the risks are, perhaps, to tips remaining where the oil price is even lower. >> richard, we appreciate the insight. have a great weekend, richard mcchoir with the royal bank of canada. craig smith will be with us for the remainder of the hour. some other news we want to talk about, it starts with microsoft. a busy week. they launch windows 7, they open their first retail store and
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today they report earnings. microsoft expected to earn 32 cents a share on about $12.4 billion worth of revenues while pc shipments edged up during the quarter. abdomen lists say it will not be enough to keep sales from dropping from year ago levels. they believe microsoft will deliver better than expected cost cutting measures and we'll see where they line up. right now in frankfurt, up by nearly 1.5%. it turns out consumers are still flocking to third quarter profits rose 68% and that blue away forecasts. strong sales of poox, electronics, dvds. amazon, though, the they won't give specific details on kindle devices, but they say it is the
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top selling product. as for the holidays, amazon predicts seals will grow by 20%. just appear amazing story. shares are up more than 14% in october. those are big moves for a company like amazon. brian, south korea's hynix semi conductor is back into profits. that was still below reuters estimates. hynix shares, this is how they're trading and reacting to this bit of news. down a little bit because much of the good news was priced in, 18,750 south korean won. still to come, a cold winter in europe and america, so that is bad news for herb sidemaker sangenta. for over 150 years, wells fargo has
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and bskyb came out with good figures. they had more subscribers than expected. so doing fairly well here, despite the growth figures. stephane has the update in paris. >> on the french market, we're driven by stronger economic data. the consumer spending was up 2.3% in september. widely above the average forecast. the pmi in october reached its highest level in nearly 3 years at 58.4. that was much better than expected. we had also this mortgage some companies reporting. danone posted much better than expected profits. the company confirmed its financial guidance for the full year, expecting a 10% increase for its underlying eps. also in very good shape is up
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nearly 3%, the company posted earnings in line with expectations but guidance expecting a recovery by the very end of 2009. that was announced yesterday. one of top gainers are in paris. >> thank you, stephane. the smi is moving a little lower. now we're only seeing gains of around 0.4%. that is the biggest gainer on the index. that's still agrichemical company sangenta company up. sales this morning,hat was a tad lower than expected. however, sales in latin america as well as the more optimistic outlook for 2010, that is what really pleased investors. on top on that, the company confirmed its full year guidance for 2009 saying that eps growth will be at 2008 levels.
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let's move on and take a look at credit suisse. that stock now dropping into the negative territory, down more than 1% now. the biggest decliner on the index, that -- although many brokers this morning had increased their price target for chris swis, the stock continuing its losses from the yesterday and that's it from me for the moment. back over to christine in singapore. >> car ho lin, thanks for that. the nikkei 225 higher 0.2%. construction machinery stocks leading the way up, but shares of japan airlines clearly in focus. that company dropping 6.6% on a nikkei report that creditors are asking the carrier to reduce its capital. if jal was liquidated, its liabilities use exceed $8 billion. south korea appears kospi rate raising as shares of automakers rallied. we had profits coming out from kia motors.
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the carmaker expects sales to grow by double digit percentage next year. the shanghai composite closing up 1.9%. today marks the launch of chinex, china's nasdaq style market that companies hope to be pushed to higher numbers. the australia s & p/asx closing up 1%. on that note, over to brian. >> fed chairman ben bernanke could capture investors' attention today. he speaks before the opening bell, talking about financial regulation and supervision at the boston fed's conference in chatham, massachusetts. that's at 8:30 a.m. new york time, about three hours from now. he is expected to speak for about 30 minutes and then take questions. cnbc will carry that live. and then at 11:30 a.m., vice
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chairman donald kohn takes part on a discussion at the financial crisis. that's at the boston fed conference. u.s. pay czar ken feinberg who has been very much in the headlines this week will be at george washington's university law school in washington. that's at noon. as for economic data, existing home sales for september will be out at 10:00 a.m. new york time. they're forecast to jump more than 5% to an annualized rate of 5.38 million homes. in addition to microsoft earnings, we'll get somebodies today from microsoft, honeywell, ingersoll-rand and whirlpool. that on your friday is the final installment of your global stock watch. >> coming up on "worldwide exchange," after a week of choppy trade, whole see if they can the finish the week on a high note.
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welcome back to "worldwide exchange." here in the states, a pair of premarket events could set the tone. microsoft earnings and a speech by fed chairman ben bernanke. >> and i'm ross westgate. here in europe, the uk remains in recession, but elsewhere growth continues on the continent. and here in asia, shares of japan airlines tumble after reports say some creditors have asking it to reduce its capital. welcome to "worldwide exchange" on this friday. microsoft comes out with its numbers in about three hours. it will be interesting to see what they have to say about the pc sales and the company in general. we've been seesawing. we were positive when we came on the air 90 minutes ago. about 30 minutes ago, we dipped into negative territory in the futures. the nasdaq is actually
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interestingly enough weakened. amazon had incredible results and you think would buoy that index a little bit and it's up about 2.25%. the s&p 500 up a little more than 2.5% at 2.5 points, as well. we were at 2.346 at our last check. we've lost one more basis point at 3.45%. ross, over to you. >> european stock markets are firmer as the ftse has recovered its poise after the recession number that we have in the uk. miners are still firm. the ftse is very much chained to the global growth. banks are firmer, as well, and that applies across the continue nept. on the currency markets, sterling has taken the brunt of that recession figure. the continued recession, it's down. the euro is firmly over 1.50 against the dollar, but the dollar is firmer against the yen. so that is a new trend we haven't seen for a little while
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and they continue to look at now the increasing yield spreads between the yen and the dollar. so we'll keep our eye on that one. christine. >> hey, ross. here in asia, markets finishing on a good note, not getting a chance to react to the uk gdp data. for today, finishing nicely higher. the weaker yen giving additional support to the exporters, the kospi up 0.6% on good earnings for some companies there. the hang seng is up 1.7%. apple, liquidity in this particular market, and the shanghai market is up 1.9%. the launch of the second style nasdaq-style board is giving a boost to this particular market and the aussie market is up almost 1%. overall, a good session here in asia. let's check out crude oil. right now, just a little higher, so the correlation seems to be breaking down between oil and dollar. nymex trading up, $81.27 a
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barrel. and brent, as well, putting on gains, as well. trading around the ranges. there we go. $79.67 a barrel, up 16 cents. brian. >> okay. obviously, you have a problem with the connection. let's bring in ben lichtenstein and greg smith is still with us. ben, what happens if from your point of view are we going to finish the week on an up note? >> well, it sure seems to. right knob, we have futures in positive territory, albeit a tight range. investors here are waiting for microsoft in addition to ben bernanke. we have that 9:00 central time coming out with home sales. i think wiping out four months of gains that we had seen. but there's a lot of investors and traders that think this number will come in higher than expected.
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so there's a lot of information out here today, closing out a busy couple of weeks that we've seen. the market has been extremely volatile. and then yesterday and thursday, retaking back all that territory to the up side. right now on the s&ps, we're looking at this 1100 level and we would like to see the dow close above 10,000 this week. >> ben, in your stimz, what was the catalyst yesterday? >> well, we saw a key reversal in the market yesterday where in the s&ps, we traded lower into a new low, into that 73 area. and the market was unable to track any really initiative-type selling down there. and once you see that, usually the market will respond and kind of work its way back with energy into the range from the previous day. so again, the inability to stark any new initiative type selling
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on the down side brings a lot of buyers in. the other thing we saw is in a trending market, the markets tend to have certain characteristics. one of the characteristics that we've been seeing since the march low during this extreme upside activity that we've been seeing, this vertical development that we've been seeing recently, is any pullbacks, any sell-off or retracement has been short lived, one or two days maximum. and that was the case yesterday. so very characteristic of the recent trend that we've been seeing to the up side since the march lows. >> so there's one camp that says too far too fast, you know, and greg, you know, i'll bring new and ask you, i mean, according to what ben says, this rally isn't tired. what is your view? >> it's been the most careful rally since the great depression. bad news, any bad news is brushed aside. there are certainly reasons to be above. i think 80% of the s&p companies
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reporting today have excited expectations. but in terms of the limitation easy, we know st bottom line is driven as necessary. but a key issue has to be the employment levels. that clearly has an impact on the consumer which is why i think you might see some growing divisions between the consumer facing industries and the industrial facing groups. so broadly speaking, we can expect markets to go higher. but just the concern is that they'll pull back when it comes. it could be quite sharp. >> you're mentioning the great depression 37 is that because you see this as a trading rally? we had that huge, powerful rally and then we lost it again. do you think something similar is possible? >> i'm just really saying any healthy rally needs pullbacks along the way. here in asia, it's not healthy.
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we need to see a pause of breath. i think the market has gotten a little ahead of yourself if terms of fundamentals. and i think you can ignore the site. so i think we need to pause for a bit. >> greg, we appreciate it. stick around. we want to get one final thought from you in a little while. ben, we'll talk to you more specifically about today's trade when you come back in about 15 minutes. still to come, a day after launching windows 7, the story from microsoft today will be their earnings will a chart decline in profits expected, at least year after year.
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well, welcome back to cnbc's "worldwide exchange." let's check in on the trading day in tokyo and check in on how it's doing with ken moriyasu from the nikkei. moriyasu-san. >> christine, the nikkei 225 closed slightly higher today. shares in soft bank rose on
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expectations that the firm would upgrade its profit projection in the earnings report next wednesday. meanwhile, the financial services agency has ordered bnp paribas in japan to extend its stock derivative operations in two weeks, following a revelation that the stock options trader at the brokerage placed large buy orders for soft bank shares in november 2008 so that the stock would not be priced at market close. tiran rose by more than 4% as they overtook shrimps, taking the crown back for the first time in three years. some banks involved in the revival of japan airlines suggested to the government that the airline should retire some of its common shares, the nikkei learned friday. the banks appeared to be advocating that shareholders shoulder more responsibility as banks are set to agree to high debt write-off. one possible idea floating among
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banks and government officials is to retire around 99% of dow's common shares, while maintaining dow's listing on the stock market. shares up to 3 mega banks each lost more than 2% today. that was the nikkei business report and with that, it's back to singapore. >> moriyasu-san, thank you very much for that. you have a good weekend, brian. >> cit has reportedly struck a tentative deal with goldman sachs over a disputed payment on a $3 billion loan. a settlement could help the commercial lender as they try to get bond dealers to agree to a debt swap offer. under that deal, goldman could be entitled to a $1 billion make whole payment, so we'll see what happens with that. the government may get involved in the book price wars that have been just amazing to watch. the american book sellers association has asked the justice department to
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investigate recent cost cuts by amazon, and several new books such as sarah palin's going rogue is under way. the bargain basement prices make it possible for smaller retailers to compete. however, some of the little guys say they're not that concerned because it affects the most commercial books which are less important to independent stores. coming up on "worldwide exchange," just like ef hutton knows all of that, when ben bernanke speaks, we always listen. will the fed chief impact today's trading? we look ahead to the u.s. market. but first, we'll hear from a liberal democrat and get his reaction that the news of britain is filled in recession, the longest in its history.
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one final thought from greg smith. the dollar is up against the yen and traders are starting to cite the dishes in yield
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differentials. which makes me question how much longer the dollar might be the fund currency. if that happens, what are the implicati implications? >> i think that's been one part of it. certainly the dollar has become a bit of a favorite as part of that carry trade. but i think it's also something a bit beyond that. let's face it, the fundamentals have been weak for some time. the decline. i think there st something that we'll see in the way of this reserve currency. i don't think that's going to happen any time soon. i think nations are generally worried about the amount of u.s. dollar that are holding and looking to diversify out of those. and i think i'm not sure of the carry trade is just the central part of that. and i think the dollar is going to continue to weaken. and that will be good for commodity necessary gold.
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there are other drivers, as well. if you look at it, oil and gold going up as well as our currencies, as well. >> let me follow up on gold. what is going to drive the rate of gold? >> fiscal stimulus as we well know and that's going to come through in terms of inflation maybe not next year, but in the years ahead. and we doubt the ability of the central banks to turn off the taps. one, they're not going to want to do so too quickly and historically, the timing hasn't been great. so i think that will continue to propel the gold prices.. also, that loss of confidence. particularly the dollar, given the propensity of did americans to turn the printing presses off. >> are you talking about asian
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diversificatio diversification? >> we're already seeing diversification to gold by china and else. so it wouldn't take much of a ramp up in gold buying by china, for instance, to see a decent spike in the gold price. i know all the talk has been -- in real terms, the gold price could reach 2,300, $2,400 based on that level back in 1980. we're not looking that aggressive yet, but certainly we're targeting the 1200 to 12300 mark in the next six months or so. >> we had an earlier conversation, greg, about when inflation is going to come here in real terms. and you talk about the gold price in that context. when is it going the start to be an issue in the real economy 1k3 and put the pressure on banks
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inspect. >> i think that will remain so for a long time, maybe even longer in the uk's case. and it's going to be remembered that nations that have large mounds is always going to favor deflation -- sorry, always going to favor inflation over deflation. so i think in terms of the choice, they're going to be reluctant to tighten any time soon. so i think that is what is going to give that kicker to inflation. that will turn the screws, if you like, on inflation. there's not any inflation in china, despite all that huge stimulus. >> that's right. it's been quite controlled. but i think with the wall of money that has gone on, the dam is going to burst and i think that's what we're talking about.
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>> so you're positive on that and cautious on the equity rally continuing? >> i think that is certainly the case. what we're saying in terms of the equity markets, we're cautious in the nearly term. we've had this massive rally for some months now and indeed since march. and really, we just need a healthy pull if we're to ensure that rally -- >> i mean, the earnings are for the quarter, aren't they? >> they have been supportive. there's been a lot of cost cutting. it's not been so much about top line growth. it's been cost cutting. and also, i mean, should unemployment if he refuses towing to go away. >> for the moment, we'll see whether he gets some more out of you. right now, though, the big news out of the uk, the british economy has shrunk again. it's not out of recession. the news sent the pound plummeting this morning.
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we had been expecting growth, and instead, it contracted. what are the implications for policy? >> well, it's what i've called the cold blast of realism. what's happened in the uk is an attempt to talk things up. but based largely on what's happening in the stock market, in luxury housing in london, bankers' bonuses and so on and out in the real world, and in manufacturing and construction particularly, we've got a continually and so far beatening recession. and it is chilly now worrying because we've now had six quarters of decline. this is not good. in terms of policy, the government and the bank of england throwing the kitchen sink at this crisis. isn't a great deal more they
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could do other than place more pressure on the banks. but certainly in terms of monetary and physical policy, they've opened all the taps. >> we could have the taps open even more and the traders are betting we'll get more quantitative easing. would you like to see that? >> well, quantitative easing is a big experiment. i've supported the principle. it's unknown territory, but the basic textbooks tell you that when you have a severe contraction of money supply, you have to cancel it through measure oefs this kind. so the principals are basically right, and they're going to have to continue doing it. >> so look, what policy -- as you say, we're throwing the kitchen sink at this and we're still contracting. are there any other policies we should try that haven't been done yet? >> there's the intervention to the banking system. i think that is an area where
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the government has been slow. i think there is also an argument about the mix of the fiscal stimulus, the value-added tax cut, which is coming to an end. it was not terribly good use of government money. certainly my party believed we could have gotten more bang for the buck by having a thought that the public spending should be carried out in that way. >> thanks for shining us, charles. >> let's bring back in ben lichtenstein. ben bernanke speaks today. what do you want him to hear on a day like today? >> i think most of it will be somewhat a prepared speech. i think it was greg that mentioned a moment ago that what we'll be focused on more so than that will be some of the responses that we see regarding the recent fed activity that we've been seeing. so i don't think this is necessarily going to be one of
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the driving forces today in the market. i think it will be a bit of a contributing factor. but i think the traders right now are looking more towards that key level of the 100 and the s&ps, trying to see the dow close out above 10,000 in addition to the home sales numbers in addition to, again, earnings reports from microsoft. >> we'll talk about microsoft. do you think it will be stronger than expected and be the catalyst to get to those levels us that you just talk about? >> yeah. that's what i'm expecting right now. one of the things that's been a major positive aspect as far as the earnings season that we've been seeing recently is that revenue has been higher. it hasn't been so much higher earnings due to cost cutting measures, it's been higher measures due to revenue.
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so the market has been responsibling to that very well and able to is that instruct off that activity. so this right now, this market teams to be on a track. i don't see anything that can decline had the concern. unemployment is still a major concern. we're seeing a little weakness in the dollar. in fact to that, we have housing sector issues, as well, still contributing. so there's some major issues out there. a lot of skepticism coming around this rally recently, again, in terms of lack of volume. some of the lack of volatility that we're seeing with the vision at extreme lows here recently. but again, i don't know very many traders that are willing to get in the way of this upside activity that we're seeing. >> ben lichtenstein,
5:55 am greg smith, a lot of good insight today. we appreciate it. let's take a quick look at your u.s. stock futures before we say good-bye. we've been in a relatively tight range, but we're kicking it around to the positive level right now. up about nine points in the dow, more than 2.25 in the nasdaq and the s&p 500 has weakened a little bit. right now, still positive across the board. u.s. "squawk box," a very special edition. we will be from the metropolitan opera house. becky quick is there. but that's it from this show. i'm brian shactman in the u.s. >> and i'm ross westgate in europe. >> here in asian with i'm christine tan 37 have a great weekend. the exchanging world
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good morning. investors shrug off a
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disappointing jobs report and take heart from some fed commentary. and there will be more this morning as fed chairman ben bernanke gets set to speak in massachusetts. plus, microsoft is getting ready to report. we preview the outlook. plus, becky quick takes center stage live from the 18th annual baron investment conference at the metropolitan opera house. it has anything to do with that boring paper you read on saturdays. some oift biggest names in business join us this morning as "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on krpz. i'm becky quick along with joe kernen and carl quintanilla. and as joe just mentioned, we are reporting live from the new york metropolitan opera house


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